ISLAMABAD: Federal Board of Revenue (FBR) has said that goods supplied under Islamic Mode of Financing have been exempted from sales tax.
In an instructions issued to the offices of Inland Revenue regarding implementation of changes in Sales Tax laws for tax year 2018, the FBR said that goods delivered under Islamic Mode of Financing ‘Murabaha’ to or by a bank or a financial institution approved by State Bank of Pakistan (SBP) or Securities and Exchange Commission of Pakistan (SECP) were outside the scope of definition of supply as contained under clause (33) of Section 2 of the Sales Tax Act, 1990 under SRO 445(I)/2004, dated June 12, 2004.
Through SRO 588(I)/2017, dated July 01, 2017, the previous SRO was amended to include goods supplied by banks or financial institutions under other Islamic mode of financing i.e. ‘Musawamah, Bai Muajjal, Bai Salam, Istisna, Tijarah and Istijrar’ in the scope of exception, meaning thereby that goods supplied under these Islamic mode of financing by banks will not be chargeable to tax.
